American billionaire investor and hedge fund manager Bill Ackman has called on the US authorities to “wake up” and implement a systemwide deposit guarantee regime now.
He argued First Republic Bank would not have failed if the FDIC temporarily guaranteed deposits while a new guarantee regime were created.
“Instead, we watch the dominoes fall at great systemic and economic cost,” he claimed.
Pointing out banking is a “confidence game,” Ackman continued, “at this rate, no regional bank can survive bad news or bad data as a stock price plunge inevitably follows.”
The regional banking system is at risk. SVB's depositors' bad weekend woke up uninsured depositors everywhere. The rapid rise in rates impaired assets and drained deposits. Zeroing out shareholders and bondholders massively increased the banks’ cost of capital. CRE losses loom.…
— Bill Ackman (@BillAckman) May 3, 2023
Noting comments from PacWest that it is “pursuing strategic alternatives' means an FDIC “shutdown over the coming weekend.”
Ackman said there is no incentive to bid until Sunday after the failure explaining the GSIBs (globally systemically important banks) have an unfair competitive advantage “as too big to fail means only their uninsured depositors can sleep soundly.”
“Until the playing field is levelled, the regional banks are at grave risk.”
“Confidence in a financial institution is built over decades and destroyed in days,” he added.
“Until investors are rewarded for betting on a wobbling bank, there will be no bid, and the best sale is the last price,” he feared.
“We are running out of time to fix this problem,” he said and asked, “How many more unnecessary bank failures do we need to watch before the FDIC, US Treasury and our government wake up?”